EXHIBIT 10.5(a)
===============================================================================
FACILITY SITE LEASE AND EASEMENT AGREEMENT
(L1)
Dated as of December 19, 2000
among
SOUTHERN ENERGY MID-ATLANTIC, LLC,
as Ground Lessor
and
DICKERSON OL1 LLC,
as Ground Lessee
and
SOUTHERN ENERGY MD ASH MANAGEMENT, LLC
DICKERSON STATION
LAND LOCATED IN MONTGOMERY COUNTY,
MARYLAND, IN CONNECTION WITH THREE COAL-FIRED
ELECTRIC GENERATING UNITS
================================================================================
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................................................................ 3
SECTION 2. LEASE OF THE GROUND INTEREST....................................................................... 3
Section 2.1. Lease of the Ground Interest........................................................ 3
Section 2.2. Basic Site Lease Term............................................................... 5
Section 2.3. Renewal Site Lease Term............................................................. 5
Section 2.4. Return of the Ground Interest....................................................... 6
Section 2.5. Terminability....................................................................... 7
Section 2.6. Election to Surrender............................................................... 8
Section 2.7. Freight and Crate................................................................... 8
SECTION 3. RENT............................................................................................... 9
Section 3.1. Rent................................................................................ 9
Section 3.2. Taxes and Assessments............................................................... 10
Section 3.3. Suspension of Rent and Other Payments............................................... 12
SECTION 4. QUIET ENJOYMENT; RELEASE RIGHTS AND RESERVED RIGHTS................................................ 12
Section 4.1. Ground Lessee's Right of Quiet Enjoyment............................................ 12
Section 4.2. Ground Lessor's Release Rights...................................................... 12
Section 4.3. Ground Lessor's Reserved Rights..................................................... 13
Section 4.4. No Liability for Exercise of the Ground Lessor's Rights............................. 14
Section 4.5. Release Rights and Reserved Rights Binding on Third Parties......................... 15
SECTION 5. USE OF THE GROUND INTEREST BY THE GROUND LESSEE.................................................... 15
SECTION 6. TRANSFER OF THE GROUND INTEREST.................................................................... 16
SECTION 7. LIENS.............................................................................................. 17
Section 7.1. Liens by the Ground Lessee.......................................................... 17
Section 7.2. Liens by the Ground Lessor.......................................................... 17
SECTION 8. MAINTENANCE AND REPAIR............................................................................. 17
SECTION 9. SITE IMPROVEMENTS.................................................................................. 18
Section 9.1. Required Site Improvements.......................................................... 18
Section 9.2. Optional Site Improvements.......................................................... 19
Section 9.3. Title to Site Improvements.......................................................... 19
i
SECTION 10. EASEMENTS.......................................................................................... 19
Section 10.1. Reservation of Easements by Ground Lessor on Facility Site.......................... 19
Section 10.2. Grant of Easements from Ground Lessor to Ground Lessee on Retained Dickerson Land... 19
Section 10.3. Grant of Easements from Southern Ash to Ground Lessee on the
Westlands Flyash Facility Site...................................................... 19
Section 10.4. Access to Easement Areas............................................................ 20
Section 10.5. Maintenance of Easement Areas....................................................... 20
Section 10.6. Use of Easement Areas............................................................... 20
Section 10.7. Relocation of Easements............................................................. 21
Section 10.8. Modifications to Easement Areas..................................................... 22
Section 10.9. Abandonment......................................................................... 22
Section 10.10. Damage or Destruction............................................................... 22
Section 10.11. Interference with Use............................................................... 22
Section 10.12. No Cost............................................................................. 23
Section 10.13. Covenants Running with the Land..................................................... 23
SECTION 11. INSURANCE.......................................................................................... 23
SECTION 12. EVENTS OF LOSS...................................................................................... 23
SECTION 13. WAIVER OF PARTITION................................................................................ 25
SECTION 14. GROUND LESSOR'S RIGHT TO PERFORM................................................................... 25
SECTION 15. SECURITY FOR THE GROUND LESSEE'S OBLIGATION UNDER THE LESSOR NOTES................................. 25
Section 15.1. Security for the Ground Lessee's Obligation under the Lessor Notes.................. 25
Section 15.2. Limitations on Granting Leasehold Liens............................................. 26
Section 15.3. Discharge of Leasehold Liens........................................................ 26
SECTION 16. NONMERGER OF REVERSIONARY INTEREST................................................................. 26
SECTION 17. MISCELLANEOUS...................................................................................... 26
Section 17.1. Amendments and Waivers.............................................................. 27
Section 17.2. Notices............................................................................. 27
Section 17.3 Survival............................................................................ 29
Section 17.4. Successors and Assigns.............................................................. 29
Section 17.5. Governing Law....................................................................... 29
Section 17.6. Severability........................................................................ 29
Section 17.7. Counterparts........................................................................ 30
Section 17.8. Headings and Table of Contents...................................................... 30
Section 17.9. Further Assurances.................................................................. 30
Section 17.10. Effectiveness of Facility Site Lease................................................ 30
ii
Section 17.11. Limitation of Liability............................................................. 30
Section 17.12. Measuring Life...................................................................... 30
Section 17.13. Memorandum.......................................................................... 31
SECTION 18. LENDER PROTECTIVE PROVISIONS....................................................................... 31
Section 18.1. Notices............................................................................. 31
Section 18.2. Default and Cure Rights............................................................. 31
Section 18.3. Assignment.......................................................................... 32
Section 18.4. Extension Options................................................................... 32
Section 18.5. New Agreement....................................................................... 32
Section 18.6. Amendment........................................................................... 33
Section 18.7. No Merger........................................................................... 33
Section 18.8. Estoppel Certificates............................................................... 33
Section 18.9. Lease Indenture Trustee Rights...................................................... 33
SECTION 19. SUBDIVISION........................................................................................ 33
iii
Page
EXHIBIT A Description of Dickerson Land
EXHIBIT B Description of the Facility
EXHIBIT C Description of the Facility Land
EXHIBIT D Description of the Westlands Flyash Facility Site
EXHIBIT E Easements on Facility Site
EXHIBIT F Easements on Retained Dickerson Land
EXHIBIT G Easements on Westlands Flyash Facility Site
EXHIBIT H Plan Depicting Easements
iv
FACILITY SITE LEASE AND EASEMENT AGREEMENT
(L1)
This FACILITY SITE LEASE AND EASEMENT AGREEMENT (L1), dated as of
December 19, 2000 (as amended, supplemented or otherwise modified from time to
time in accordance with the provisions hereof, this "Facility Site Lease"),
-------------------
among SOUTHERN ENERGY MID-ATLANTIC, LLC, a Delaware limited liability company,
(the "Ground Lessor"), DICKERSON OL1 LLC, a Delaware limited liability company,
-------------
(the "Ground Lessee") created for the benefit of SEMA OP3 LLC, a Delaware
-------------
limited liability company (the "Owner Participant") and SOUTHERN ENERGY MD ASH
-----------------
MANAGEMENT, LLC, a Delaware limited liability company (solely for the purposes
of being bound by the terms, covenants and conditions contained in Section 10
hereof (including, without limitation, the granting of the easements set forth
in Section 10.3 hereof )) ("Southern Ash")
------------
WITNESSETH:
WHEREAS, the Ground Lessee is governed by the Limited Liability Company
Agreement, dated as of December 18, 2000 (the "Lessor LLC Agreement"), between
--------------------
Wilmington Trust Company, acting thereunder not in its individual capacity but
solely as independent manager (the "Owner Manager") and the Owner Participant;
-------------
WHEREAS, pursuant to the Land Deed and the Bill of Sale dated as of the
date hereof, the Ground Lessor has acquired from Potomac Electric Power Company
or its successors or assigns ("Pepco"), inter alia, that certain land in
-----
Montgomery County, Maryland, and more particularly described in Exhibit A
---------
attached hereto and made a part hereof (the "Dickerson Land"), together with
--------------
certain improvements and fixtures located thereon or thereunder (the "Dickerson
---------
Improvements"), other than the Facility;
- ------------
WHEREAS, pursuant to the Facility Deed and the Bill of Sale, the Ground
Lessee has acquired from Pepco an undivided ownership interest in the Facility
(which interest is defined in Appendix A to the Participation Agreement as the
"Undivided Interest") and which Facility includes (1) the Dickerson Base-Load
- -------------------
Units 1, 2 and 3 comprised of the 546 megawatt (net) coal-fired electric
generating units and (2) certain other improvements and fixtures which are
located above-ground, all as more particularly described in Exhibit B attached
---------
hereto and made a part hereof, as a tenant-in-common with the other owners of
undivided ownership interests in the Facility;
WHEREAS, the Facility is located on that certain portion of the Dickerson
Land more particularly described in Exhibit C attached hereto and made a part
---------
hereof (the "Facility Land"), and, with respect to the transmission lines only
-------------
(which transmission lines are included as part of the Facility, as described on
Exhibit B attached hereto), on a portion of the Retained Dickerson
- ---------
1
Land (that portion of the Retained Dickerson Land on which the transmission
lines are located is referred to as the "Retained Dickerson Land Transmission
------------------------------------
Line Area");
- ---------
WHEREAS, all of the Dickerson Improvements located under the Facility
Land are herein referred to as the "Leased Dickerson Improvements". The
-----------------------------
Dickerson Land excluding the Facility Land is herein referred to as the
"Retained Dickerson Land".
- ------------------------
WHEREAS, the Facility Land and the Leased Dickerson Improvements
(collectively, the "Facility Site") do not include the Facility or any part(s)
-------------
thereof, and no part of the Facility is being leased to the Ground Lessee
hereunder;
WHEREAS, pursuant to the Special Warranty Deed dated as of the date
hereof, Southern Ash has acquired from Pepco that certain land in Montgomery
County, Maryland, and more particularly described on Exhibit D attached hereto
and made a part hereof (the "Westlands Flyash Facility Site"), together with the
------------------------------
improvements and fixtures located thereon or thereunder;
WHEREAS, pursuant to this Facility Site Lease, (i) the Ground Lessor will
reserve unto itself, its successors and assigns, certain non-exclusive easements
for the Basic Site Lease Term (as defined herein) and, subject to the terms
hereof, each Renewal Site Lease Term (as defined herein) and (ii) the Ground
Lessor will lease to the Ground Lessee a 63.3% undivided leasehold interest in
the Facility Site as a tenant-in-common with, pursuant to the Other Facility
Site Leases, three (3) other owners of undivided leasehold interests in the
Facility Site, and will grant to the Ground Lessee certain non-exclusive
easements (such undivided leasehold interest, together with the non-exclusive
easements granted to the Ground Lessee hereunder, and subject to the non-
exclusive easements reserved by the Ground Lessor hereunder, and together with,
and subject to all easements and appurtenances (including those granted by Pepco
pursuant to the Easement, License and Attachment Agreement (Dickerson Station)
dated on or about the date hereof between Pepco and Ground Lessor, which is
intended to be recorded in the appropriate recorder's office in Montgomery
County, Maryland) (the "Ground Interest") for the Basic Site Lease Term and,
---------------
subject to the terms hereof, each Renewal Site Lease Term;
WHEREAS, the Ground Lessee and such three (3) other owners of undivided
leasehold interests in the Facility Site, after execution and delivery of this
Facility Site Lease and the Other Facility Site Leases, will own in the
aggregate one hundred percent (100%) of the leasehold interests in the Facility
Site; and
WHEREAS, the rights and obligations of the Ground Lessor and the Ground
Lessee under this Facility Site Lease are further subject to the terms and
provisions of the Ownership and Operation Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
2
SECTION 1. DEFINITIONS
Capitalized terms used in this Facility Site Lease, including the
recitals, and not otherwise defined herein shall have the respective meanings
set forth in Appendix A to the Participation Agreement (L1), dated as of
December 18, 2000 (as amended, supplemented or otherwise modified from time to
time, the "Participation Agreement"), among the Ground Lessor, the Ground
-----------------------
Lessee, the Owner Manager, the Owner Participant and State Street Bank and Trust
Company of Connecticut, National Association, as Pass Through Trustee and as
Lease Indenture Trustee. The general provisions of Appendix A to the
Participation Agreement shall apply to terms used in this Facility Site Lease.
SECTION 2. LEASE OF THE GROUND INTEREST
Section 2.1. Lease of the Ground Interest.
(a) Upon the terms and conditions set forth in this Facility Site
Lease, the Ground Lessor hereby leases to the Ground Lessee, and the Ground
Lessee hereby leases from the Ground Lessor, the Ground Interest.
(b) The Ground Lessor and the Ground Lessee understand and agree that
(i) fee title to the Facility Site remains vested in the Ground Lessor, (ii)
this Facility Site Lease is subject to the Permitted Encumbrances and (iii)
title to the Undivided Interest is vested in the Ground Lessee.
(c) The Ground Lessee understands and agrees that no portion of the
Dickerson Land or any improvements located thereon or thereunder, other than the
undivided interest in the Facility Land and the Leased Dickerson Improvements is
being leased pursuant to this Facility Site Lease, and further, that the Ground
Interest includes only the undivided interest in the Facility Land and the
Leased Dickerson Improvements, together with and subject to any related
easements. The Ground Lessor and the Ground Lessee each understand and agree
that upon reasonable request of the other, at Ground Lessor's cost and expense
(if such request is made by the Ground Lessor or by the Ground Lessee on or
prior to the expiration or earlier termination of the Facility Lease and
otherwise at the cost and expense of the requesting party), it shall promptly
and duly execute and deliver such reasonable documents and further take
reasonable action to acknowledge and confirm to the other or third parties
specified by the other, either that (x) fee title in the Facility Site remains
vested in the Ground Lessor, and the Ground Lessee has no rights to all or any
portion of the Facility Site, except as set forth in this Facility Site Lease or
any of the other Operative Documents or (y) title to the Undivided Interest is
vested in the Ground Lessee and the Ground Lessor has no rights to all or any
portion of the Undivided Interest, except as set forth in this Facility Site
Lease or any of the other Operative Documents.
3
(d) The parties agree that the Facility, Components, Replacement
Components and all equipment at any time acquired by the Ground Lessee and
located on the Facility Site and (with respect to the transmission lines only)
the Retained Dickerson Land Transmission Line Area (but excluding any Severable
Improvement, title to which, in each case, is reserved to the Ground Lessor)
have been severed by agreement and intention of the parties hereto and of the
other owners of an undivided ownership interest therein and (i) shall remain
severed from the Facility Site and (with respect to the transmission lines only)
the Retained Dickerson Land Transmission Line Area, (ii) shall be considered
with respect to the interests of the parties hereto as the property of the
Ground Lessee, (iii) even though attached to or affixed to or installed upon the
Facility Site or the Retained Dickerson Land Transmission Line Area, shall not
be considered to be fixtures or a part of the Facility Site and the Retained
Dickerson Land Transmission Line Area or improvements thereto and (iv) shall not
be or become subject to the lien of any mortgage or deed of trust heretofore or
hereafter placed by the Ground Lessor. The Ground Lessor waives any rights it
may have under the laws of the State of Maryland arising under this Facility
Site Lease or otherwise to any Lien upon, or any right to distress or attachment
upon, or any other interest in, any item constituting part of the Facility,
Components, Replacement Components or any equipment and other property at any
time acquired by the Ground Lessee and located on the Facility Site and (with
respect to the transmission lines only) the Retained Dickerson Land Transmission
Line Area (but excluding, for the avoidance of doubt, any Severable Improvement
as provided above). The Ground Lessor acknowledges that the Ground Lessee is
the equitable and beneficial owner of the Undivided Interest, Components,
Replacement Components and all such other equipment and property relating solely
to the Facility at any time acquired by the Ground Lessee and located on the
Facility Site and (with respect to the transmission lines only) the Retained
Dickerson Land Transmission Line Area and covenants and agrees that, subject to
any limitations in and to the terms and conditions of this Facility Site Lease
and the other Operative Documents, following the expiration or earlier
termination of the Facility Lease and on, prior to or following (subject to the
provisions of Section 2.7 hereof) the expiration or earlier termination of this
Facility Site Lease, the Ground Lessee shall have the right to remove, from time
to time, the Facility, Components, Replacement Components or any part thereof or
any such other equipment and property relating solely to the Facility at any
time acquired by the Ground Lessee and located on the Facility Site and the
Retained Dickerson Land Transmission Line Area, from the Facility Site and the
Retained Dickerson Land Transmission Line Area and the Ground Lessor hereby
waives any claim it might have against the Ground Lessee for waste by virtue of
such removal; provided, however, that the Ground Lessee shall not remove all or
any portion of the Facility, or any such other equipment or property (i) prior
to the expiration or earlier termination of the Facility Lease or (ii) necessary
for the Facility Site and the Retained Dickerson Land Transmission Line Area to
comply with the Requirements of Law.
(e) The Ground Lessor hereby agrees that, if at any time on or prior
to the expiration, termination or surrender of the Facility Lease, any
Improvement is made (whether a Required Improvement or an Optional Improvement)
and such Improvement is or will be located on land outside the then boundaries
of the Facility Site, it shall, at any time prior to completion of such
Improvement, grant to the Ground Lessee all appropriate real estate interests in
and to the
4
land underlying such Improvement, together with adjoining additional
land, that would be necessary and appropriate in connection with the ownership
and operation of such Improvement to its full use and benefit. At the request
of the Ground Lessee, the Ground Lessor and the Ground Lessee shall enter into
an amendment to this Facility Site Lease or other document (in recordable form)
reflecting such real estate interest, all at no cost or expense to the Ground
Lessee. The Ground Lessor and the Ground Lessee agree to cooperate with each
other in connection with, and to use commercially reasonable efforts to minimize
any costs and expenses (including, without limitation, Maryland recordation
taxes) to be incurred as a result of the granting of any such real estate
interests. If at the time of the return of the Facility pursuant to the
Facility Lease, title to any such Improvement remains with or is transferred to
the Ground Lessor, the Ground Lessee shall surrender any real estate interests
granted to the Ground Lessee with respect to any such Improvement.
Section 2.2. Basic Site Lease Term. The term of this Facility Site
Lease shall commence on the Closing Date and shall terminate at 11:59 p.m. (EST)
on December 18, 2038 (the "Basic Site Lease Term"), subject to earlier
---------------------
termination pursuant to Section 2.5 hereof, surrender pursuant to Section 2.6
hereof, or renewal pursuant to Section 2.3 hereof.
Section 2.3. Renewal Site Lease Term.
(a)(i) If the Ground Lessor exercises its option to renew the
Facility Lease pursuant to Section 15.1(a) thereof (the "First Wintergreen
-----------------
Renewal Lease Option") and the reappraised remaining useful life of the Facility
- --------------------
as set forth in the appraisal obtained in connection with such renewal extends
beyond the Basic Site Lease Term, this Facility Site Lease shall automatically
and without further act by any Person be renewed for a period commencing upon
expiration of the Basic Site Lease Term and terminating on the earlier to occur
of (x) December 18, 2099 and (y) the last day of the Facility's reappraised
remaining useful life.
(ii) If the Ground Lessor exercises its option to renew the
Facility Lease pursuant to Section 15.1(b) thereof (the "Second Wintergreen
------------------
Renewal Lease Option") and the reappraised remaining useful life of the
- --------------------
Facility as set forth in the appraisal obtained in connection with such renewal
extends beyond the then remaining Site Lease Term (as defined herein) (as
extended pursuant to Section 2.3(a)(i) above), this Facility Site Lease shall
automatically and without further act by any Person be renewed for a period
commencing at the end of the Site Lease Term (as extended pursuant to Section
2.3(a)(i) above) and terminating on the earlier to occur of (x) December 18,
2099 and (y) the last day of the Facility's reappraised remaining useful life.
(iii) If the Ground Lessor exercises any option to renew the
Facility Lease pursuant to Section 15.2 thereof (the "FMV Renewal Lease Option")
------------------------
for a FMV Renewal Lease Term which extends beyond the then remaining Site Lease
Term, this Facility Site Lease shall automatically and without further act by
any Person be renewed for a period commencing at the
5
end of the then remaining Site Lease Term and terminating on the earlier to
occur of (x) December 18, 2099 and (y) the last day of the FMV Renewal Lease
Term for which the Facility Lease is so extended.
(b) The Ground Lessee shall have the option during the Basic Site
Lease Term and during any Renewal Site Lease Term to renew this Facility Site
Lease for a period commencing upon the then expiration date of this Facility
Site Lease and ending on the earlier to occur of (x) December 18, 2099 and (y)
the last day of the reappraised remaining useful life of the Facility as set
forth in an appraisal obtained in connection with any such renewal. The Ground
Lessee may exercise such renewal option by written notice to the Ground Lessor
that the Ground Lessee elects to renew this Facility Site Lease, given not
earlier than eighteen (18) months prior to the end of, and no later than the end
of, the Site Lease Term then in effect. The useful life of the Facility under
this paragraph (b) shall be determined by an Independent Appraiser selected by
the Ground Lessee and reasonably acceptable to the Ground Lessor. The Ground
Lessee shall pay all expenses and fees of such Independent Appraiser.
(c) Any extension of the Basic Site Lease Term under this Section 2.3
is referred to herein as a "Renewal Site Lease Term", and together with the
-----------------------
Basic Site Lease Term and all other Renewal Site Lease Terms, the "Site Lease
----------
Term".
- ----
Section 2.4. Return of the Ground Interest.
(a) Return. Upon any expiration or earlier termination or surrender
------
of this Facility Site Lease, the Ground Lessee, at its expense, if return is
after the expiration or termination of the Site Sublease Term and not in
connection with the termination or expiration of the Facility Lease and
otherwise at no expense to the Ground Lessee, shall return the Ground Interest
to the Ground Lessor by surrendering the Ground Interest into the possession of
the Ground Lessor, without representation or warranty other than a warranty as
to the absence of Owner Lessor Liens accompanied by a warranty of the Owner
Participant as to the absence of Owner Participant Liens and upon the request of
the Ground Lessor, shall execute, acknowledge and deliver a release and
termination of this Facility Site Lease to be prepared by the Ground Lessor at
its expense and in a form reasonably satisfactory to the Ground Lessee to be
duly recorded at the Ground Lessor's expense in the appropriate recorder's
office located in Montgomery County, Maryland. The obligations of the Ground
Lessee under this Section 2.4 shall survive the termination of this Facility
Site Lease.
(b) Condition Upon Return. If the Ground Interest is returned by the
---------------------
Ground Lessee upon or in connection with the termination of the Site Sublease
Term, the Facility Site shall be returned in the same condition as returned to
the Ground Lessee by the Ground Lessor under the Facility Site Sublease. If
following the expiration or earlier termination of the Facility Site Sublease
the Facility Site is being operated by the Ground Lessor or its Affiliate
pursuant to the Ownership and Operation Agreement, the Ground Lessor shall
accept the return of the Facility Site in the same condition as then being
operated by the Ground Lessor or its
6
Affiliate under the Ownership and Operation Agreement. If the Ground Interest is
returned by the Ground Lessee pursuant to 2.4(a) hereof at any time after either
or both of the aforesaid periods, in addition to the terms set forth in Section
2.4(a):
(i) the Facility Site shall be in at least as good condition, ordinary
wear and tear excepted, as it would have been in had it been maintained from and
after the expiration of the Site Sublease Term in compliance with the provisions
of this Facility Site Lease (including, without limitation, the provisions of
Section 8 hereof), subject, nevertheless, to the conditions in effect at the
time the Facility Site was returned to the Ground Lessee by the Ground Lessor
under the Facility Site Sublease; and
(ii) if the Ground Lessee has not exercised its rights under Section
2.7 hereof or if it has exercised such rights but has accepted the Ground
Lessor's offer to purchase the Undivided Interest, the Ground Lessee shall
assign, without representation or warranty, an undivided interest equal to the
Owner Lessor's Percentage in any and all licenses and permits of any
Governmental Authorities or other Persons which are then in effect in connection
with the use, operation or maintenance of the Facility Site and the Retained
Dickerson Land Transmission Line Area that are not already issued in the name of
the Ground Lessor, to the Ground Lessor or a transferee or designee of the
Ground Lessor, to the extent such assignment is permitted by Requirements of Law
and the provisions of such license or permit.
Section 2.5. Terminability.
(a) Subject to Section 2.5(b) and Section 2.6 hereof, this Facility
Site Lease shall not be terminated nor shall any of the rights granted or
conveyed hereunder to the Ground Lessee be extinguished, diminished, lost or
otherwise impaired, or be merged into or with any other estate, in whole or in
part, by any circumstance of any character or for any reason whatsoever,
including, without limitation, any of the following: (i) any loss or destruction
of, or damage to, the Facility or any Component or interruption or cessation in
use or possession thereof or any part thereof by the Ground Lessee or the Ground
Lessor for any reason whatsoever and of whatever duration, (ii) the
condemnation, requisition, expropriation, seizure or other taking of title to or
use of the Facility, any Component or any part thereof by any Governmental
Authority or otherwise, (iii) any prohibition, limitation or restriction on the
use by any Person of all or any part of its property or the interference with
such use by any Person, or any eviction by paramount title or otherwise, (iv)
any inadequacy, incorrectness or failure of the description of the Facility Site
or the Ground Interest or any part thereof or any rights or property in which an
interest is intended to be granted or conveyed by this Facility Site Lease, (v)
any insolvency, bankruptcy, reorganization or similar proceedings by or against
the Ground Lessor, the Ground Lessee or any other Person, (vi) the failure by
the Ground Lessee to comply with Section 3, Section 5, Section 8, Section 10 or
any other provision hereof, or (vii) any other reason whatsoever, whether
similar or dissimilar to any of the foregoing.
7
(b) Notwithstanding the foregoing paragraph, this Facility Site Lease
shall terminate upon the expiration or earlier termination of the Facility Lease
(provided the Lien of the Lease Indenture has been discharged in accordance with
the terms thereof) where, in connection with such expiration or early
termination, (i) the Ground Lessee sells, conveys or otherwise transfers the
Undivided Interest to the Ground Lessor, (ii) the Owner Participant sells,
conveys or otherwise transfers the Lessor Membership Interest to the Ground
Lessor, (iii) the Ground Lessor purchases all of the outstanding membership
interests in the Owner Participant, or (iv) an Event of Loss has occurred, the
Facility Lease has terminated as a result thereof and, in each case, the Ground
Lessor has paid all amounts required to be paid under Section 10.2 of the
Facility Lease.
Section 2.6. Election to Surrender. The Ground Lessee may, so long as
the Lien of the Lease Indenture has been discharged in accordance with the terms
thereof, elect to surrender the Ground Interest and transfer this Facility Site
Lease to the Ground Lessor at any time following the expiration or termination
of the Site Sublease Term upon payment of $1.00 to the Ground Lessor, subject to
the rights set forth in Section 2.7, without representation or warranty other
than a warranty as to the absence of Owner Lessor Liens accompanied by a
warranty of the Owner Participant as to the absence of Owner Participant Liens.
Upon such surrender, all obligations and liabilities of the Ground Lessee
hereunder arising after such surrender, including its obligation to make rental
payments hereunder, but subject to the rights set forth in Section 2.7 hereof,
shall automatically be assumed by the Ground Lessor and the Ground Lessee shall
be automatically released therefrom.
Section 2.7. Freight and Crate. For a period of one-hundred eighty (180)
days following the expiration, termination or surrender of this Facility Site
Lease, the Ground Lessee shall have the right, but not the obligation, to
require the Ground Lessor at the Ground Lessor's sole risk and expense, to
dismantle, remove and deliver that portion of the Facility comprised of the
movable parts f.o.b. to a railroad or other suitable common carrier or, at the
Ground Lessee's risk, to keep and store such movable parts on the Facility Land
for a period of up to one hundred eighty (180) days following such expiration,
termination or surrender. Notwithstanding the foregoing, if the Ground Lessee
shall have requested the Ground Lessor to dismantle, remove and deliver such
portions of the Facility, the Ground Lessor may avoid dismantling, storing and
shipping such parts of the Facility by offering to purchase the Undivided
Interest from the Ground Lessee at a price equal to the greater of (a) $1.00 or
(b) the Fair Market Sales Value of the Undivided Interest determined in
accordance with the Appraisal Procedure (taking into account that the Facility
would otherwise be required to be removed from the Facility Site and therefore
such value shall be determined after deducting the estimated cost of
dismantling, removal and shipment of the movable parts and the cost of restoring
the Facility Site to the condition that existed at the end of the Site Sublease
Term, ordinary wear and tear excepted). In the event the Ground Lessee rejects
the Ground Lessor's offer to purchase the Undivided Interest pursuant to this
Section 2.7, the Ground Lessee shall, at its sole risk and expense, promptly
after the delivery to the Ground Lessor of notice of such rejection, dismantle
and remove the Facility from the Facility Site and the Retained Dickerson Land
Transmission Line Area and restore the
8
Facility Site and the Retained Dickerson Land Transmission Line Area to the
condition that existed at the end of the Site Sublease Term, ordinary wear and
tear excepted. In lieu of such dismantling, removal and restoration by the
Ground Lessee, the Ground Lessee may transfer all of its right, title and
interest in and to the Undivided Interest to the Ground Lessor for the
consideration of One Dollar ($1.00). Any sales, transfer or similar taxes
resulting from the Ground Lessor or its designee so obtaining any interest in
any portion of the Facility, whether through deemed or actual conveyance or
otherwise, shall be paid by the Ground Lessor. The provisions of this Section
2.7 shall expressly survive the expiration or earlier termination of the Site
Lease Term and any surrender of this Facility Site Lease pursuant to Section 2.6
hereof. In no event shall the failure of either party to remove the Facility as
provided herein be deemed a default under this Facility Site Lease, but the
rights of the parties to enforce the provisions of this Section 2.7 shall not
otherwise be affected at law or in equity.
SECTION 3. RENT
Section 3.1. Rent. The Ground Lessee shall pay to the Ground Lessor on
June 30 and December 30 of each year during the Basic Site Lease Term THREE
THOUSAND EIGHT HUNDRED AND 00/100 DOLLARS ($3,800.00) as rent for the semi-
annual period ending on such date (a total of $7,600.00 annually); provided that
the first payment of rent shall be payable on the Closing Date and shall be
prorated from the Closing Date to December 29, 2000. For any Renewal Site Lease
Term, the Ground Lessee agrees to pay to the Ground Lessor annual rent
calculated in accordance with the formula set forth below. The initial
calculation of such annual rent shall be made within thirty (30) days after the
expiration of the Basic Site Lease Term and shall be effective the day
immediately following the last day of the Basic Site Lease Term (the "Rent
----
Adjustment Date"), and shall be subsequently calculated every fifth (5th) year
- ---------------
thereafter for so long as this Facility Site Lease continues (the Rent
Adjustment Date and each anniversary thereof for which rent is recalculated as
described above is referred to as a "Change Date"). In applying the formula the
-----------
following definitions shall prevail:
(A) "Bureau" means the Bureau of Statistics of the United States
------
Department of Labor or any successor agency that shall issue the indices or data
referred to in subdivision (B) below.
(B) "Price Index" means the U.S. Consumer Price Index for all Urban
-----------
Consumers, - U.S. City Average (all items) as issued from time to time by the
Bureau or if the publication of the Consumer Price Index is discontinued, a
comparable index similar in nature to the discontinued index which clearly
reflects the diminution (or increase) in the real value of the purchasing power
of the U.S. Dollar.
(C) "Monthly Price Index" means the Price Index issued by the Bureau for
-------------------
each respective month in which a Change Date occurs. Each Change Date will thus
have its own Monthly Price Index.
9
(D) "Base Index" means the Price Index issued by the Bureau for the month
----------
of December, 2037.
(E) The "issue" of a Price Index means the release to the public of Price
-----
Index for the relevant month and the date of issue shall be the date it is so
released, whether or not the release occurs within such relevant month.
Retroactive adjustments shall be made to any payments made with respect to a
month before the issue of a Price Index for that month.
Commencing on any Change Date, the annual rent payable by the Ground Lessee
shall be increased or decreased for the next five (5) year period to an amount
calculated by multiplying the annual rent in effect for the period immediately
prior to such Change Date by a fraction, the numerator of which is the Monthly
Price Index in respect of the Change Date in question and the denominator of
which is the Monthly Price Index in respect to the immediately preceding Change
Date (or the Base Index with respect to the Rent Adjustment Date). Such annual
rent shall be payable semi-annually in two installments in arrears on each June
30 and December 30 during the Renewal Site Lease Term. All such rent for any
partial semi-annual period during which the last day of the Site Lease Term
occurs shall be prorated, in each case, on the basis of the actual number of
days in such semi-annual period. During the Site Sublease Term, each payment of
rent by the Ground Lessee for the lease of the Ground Interest pursuant to this
Section 3.1, and each payment of rent by the Ground Lessor for the sublease of
the Ground Interest pursuant to Section 4 of the Facility Site Sublease shall be
automatically offset one against the other, and no amounts shall be payable by
the Ground Lessee or the Ground Lessor in respect thereof.
Section 3.2. Taxes and Assessments.
(a) From and after the expiration or termination of the Site Sublease
Term and until the earlier of the expiration, surrender or termination of the
Site Lease Term pursuant to and in accordance with this Facility Site Lease, the
Ground Lessee agrees to pay to the Ground Lessor an amount equal to the Owner
Lessor's Percentage of all Taxes and assessments, general or special, taxed,
charged, levied, assessed or imposed upon the Facility Site (it being understood
that the Ground Lessee shall not be responsible for any income or similar taxes
imposed against the Ground Lessor for the rent hereunder, or for any sales, use,
excise, transfer, recording or similar taxes payable by the Ground Lessor; or
any corporate franchise or doing business tax or similar tax or fee imposed on
the Ground Lessor or in connection with the business of or any interests owned
or held by, the Ground Lessor). Such payment shall be due upon demand by the
Ground Lessor, but in no event shall such amounts be due prior to the date such
Taxes and assessments are due and payable to a taxing or assessing Governmental
Authority. If the Facility Site is not separately assessed as a separate tax
lot from the Retained Dickerson Land, with respect to the land component of any
such Taxes and assessments the Ground Lessee shall pay a share equal to the
Owner Lessor's Percentage of such Taxes and assessments based on the ratio which
the area of the Facility Site bears to the total area of the assessment parcel
and with respect to any improvements component of any Taxes and assessments, the
Ground Lessee shall pay the portion of the Taxes and assessments attributable to
the Undivided Interest. Notwithstanding the
10
provisions of this Section 3.2(a), prior to the expiration or termination of the
Site Sublease Term, the Ground Lessor shall pay all Taxes and assessments,
general or special, taxed, charged, levied, assessed or imposed upon, or with
respect to, the Facility Site , this Facility Site Lease, the Ground Lessor or
in connection with the business of, or any interests owned or held by, the
Ground Lessor and the Ground Lessor shall indemnify the Ground Lessee with
respect thereto for such period, as provided in and subject to the terms,
conditions and limitations in, Section 10.2 of the Participation Agreement. Such
provisions of Section 10.2 of the Participation Agreement shall survive the
expiration or termination of this Facility Site Lease.
(b) Taxes and assessments shall be prorated between the Ground Lessor
and the Ground Lessee for (a) the year in which the Site Lease Term expires, as
of the date of expiration of the Site Lease Term and (b) for the year in which
the expiration or earlier termination of the Site Sublease Term occurs.
Proration of Taxes and assessments due to be paid with respect to such years
shall be paid and appropriate adjustment and payment shall be made on the basis
of actual Taxes and assessments, allocated as described in Section 3.2(a). To
the extent the Ground Lessee's pro rata share of any Taxes and assessments under
this Facility Site Lease shall be paid by the Ground Lessor appropriate
adjustments and payments shall be made between the parties, at the time the
actual Taxes and assessments are known, as may be necessary to accomplish
proration as herein provided.
(c) From and after the expiration or termination of the Site Sublease
Term and until the earlier of the expiration, surrender or termination of the
Site Lease Term pursuant to and in accordance with this Facility Site Lease, the
Ground Lessee shall have the right to contest any Taxes and assessments required
to be paid by the Ground Lessee under this Facility Site Lease provided the
Ground Lessee shall in good faith and with due diligence contest the same or the
validity thereof by appropriate legal proceedings which shall have the effect of
preventing the collection of the Taxes and assessments and the sale or
foreclosure of any Lien for such Taxes and assessments during such contest
(unless the Ground Lessee shall provide the Ground Lessor such security as may
be reasonably required by the Ground Lessor to insure payment of the full amount
of such Taxes and assessments, together with any interest and penalties which
may accrue with respect thereto). The Ground Lessee shall have the right, at
its sole expense, to institute and prosecute, in the Ground Lessor's name, any
suit or action to contest any Taxes and assessments required to be paid by the
Ground Lessee or to recover the amount of any such Taxes and assessments but, in
such event, the Ground Lessee hereby covenants and agrees to indemnify and save
the Ground Lessor harmless from any and all costs and expenses, including
reasonable attorneys fees, in connection with any such suit or action. Any
funds recovered by the Ground Lessee attributable to the period from and after
the termination of the Site Sublease Term until the earlier of the expiration,
surrender or termination of the Site Lease Term as a result of any such suit or
action shall belong to the Ground Lessee, unless the Ground Lessor shall have
paid the Tax and assessment with respect to such period. Any part of such
recovery relating to any period ending on or prior to the expiration or
termination of the Site Sublease Term and any period beginning after the
expiration, surrender or termination of the Site Lease Term shall be paid to the
Ground Lessor, unless the Ground Lessee shall have paid the Tax and assessment
11
with respect to such period. Notwithstanding the foregoing, the Ground Lessee
shall be entitled to reimbursement for any out-of-pocket costs and expenses
incurred in connection with any such suit or action to the extent of any funds
recovered, and any amounts payable to the Ground Lessor pursuant to the
immediately two sentences shall be reduced by a portion of such out-of-pocket
costs and expenses, to be determined by the Ground Lessor and Ground Lessee,
acting reasonably, taking into account the amount of the recovery paid to each
party.
Section 3.3. Suspension of Rent and Other Payments. In the event the
Ground Lessee is entitled by the terms of the Facility Lease to exercise
remedies as a result of a Lease Event of Default and any amounts remain unpaid
to the Ground Lessee under the Facility Lease or any other Operative Document as
a result of such Lease Event of Default, payment of any amounts owed to the
Ground Lessor by the Ground Lessee under this Facility Site Lease, including
without limitation, payments of rent and other amounts pursuant to Section 3.1
or 3.2 hereof, may, in the sole discretion of the Ground Lessee, be suspended
until such time as all amounts due and owing to the Ground Lessee from the
Ground Lessor under the Operative Documents have been paid in full.
SECTION 4. QUIET ENJOYMENT; RELEASE RIGHTS AND RESERVED RIGHTS
Section 4.1. Ground Lessee's Right of Quiet Enjoyment. The Ground
Lessor warrants that it owns good, clear, record and marketable title to the
Facility Site subject only to the Permitted Encumbrances and that it has full
right and authority to lease the Ground Interest to the Ground Lessee pursuant
to the terms of this Facility Site Lease and agrees that, notwithstanding any
provision of any other Operative Document to the contrary, so long as the Site
Lease Term has not been terminated or surrendered pursuant to the express
provisions of Section 2.5, Section 2.6, or Section 6 hereof, neither the Ground
Lessor nor any other Person claiming by, through, or under the Ground Lessor
shall interfere with or interrupt the quiet enjoyment of the use, operation and
possession by the Ground Lessee of the Ground Interest subject to the terms
hereof.
Section 4.2. Ground Lessor's Release Rights. Notwithstanding any
other provisions in this Facility Site Lease to the contrary, the Ground Lessor
shall have the right from time to time to grant, create or release one or more
rights-of-way and easements over or in respect of any portions of the Facility
Site (collectively the "Ground Lessor's Release Rights"); provided, however,
------------------------------
that such grant, creation, or release (a) shall not have a material adverse
effect on the use or operation of the Facility Site as contemplated herein or of
the Facility as contemplated by the Operative Documents or herein or preclude
the use and operation of the Facility Site or the Facility in substantially the
same manner and to substantially the same extent as was permitted prior to the
exercise of the Ground Lessor's Release Rights, (b) shall not diminish, other
than in an immaterial respect, the current and residual value, remaining useful
life or utility of the Facility as measured immediately prior to such grant,
creation or release, assuming the Facility shall then be in the condition
required to have been maintained by the terms of the Facility Lease, or (c)
cause the Facility to become "limited use" property within the meaning of Rev.
Proc. 75-
12
28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647; and provided, further,
this Facility Site Lease and any Lien on the Ground Interest or otherwise under
this Facility Site Lease, without the necessity of the execution, delivery or
recording of any further instrument whatsoever shall be subject to any right-of-
way or easement (the "Released Property") so granted, created or released.
-----------------
Notwithstanding the foregoing, to the extent that any further instrument shall
be required to effect such release, upon the request of the Ground Lessor, the
Ground Lessee shall execute (in recordable form to the extent required) and
deliver any such further instrument which shall be prepared by Ground Lessor at
its expense and shall be in form and substance reasonably satisfactory to the
Ground Lessee.
Section 4.3. Ground Lessor's Reserved Rights.
(a) Notwithstanding any other provision in this Facility Site Lease to
the contrary, the Ground Lessor reserves for itself and its agent, licensees,
invitees, employees, lessees, sublessees, successors, and assigns, the following
rights:
(i) the right from time to time to use the Ground Interest during
the Site Lease Term to develop, construct, use, operate and maintain the Leased
Dickerson Improvements and any buildings, facilities, improvements or other
structures (other than the Facility), whether now or hereinafter existing on the
Facility Site, which shall include without limitation, (A) the right to
construct, install, operate, use, repair and relocate buildings, facilities,
improvements and structures (other than with respect to or in connection with
the Facility) on or under the Facility Site, including buildings, roads, paths,
walkways, sanitary sewers, storm drains, water and gas mains, water cooling
systems, waste disposal systems, electric power lines, telephone, television and
telecommunication lines, fire protection systems, safety sensor and monitoring
systems and utility lines and systems, provided, however, that such development,
construction, use, operation or maintenance shall not, individually or in the
aggregate, have a material adverse effect on the use or operation of the
Facility Site as contemplated herein or of the Facility as contemplated by the
Operative Documents or herein or preclude the use or operation of the Facility
Site in substantially the same manner and to substantially the same extent as
was permitted prior to any such development, construction, installation,
operation, use, repair or relocation, and shall not diminish, other than in an
immaterial respect, the current and residual value, remaining useful life or
utility of the Facility as measured immediately prior to such development,
construction, use, operation or maintenance, assuming the Facility shall then be
in the condition required to have been maintained by the terms of the Facility
Lease, or cause the Facility to become "limited use" property within the meaning
of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647, or
(B) any such acts as may be required to comply with any Requirements of Law
(including any FERC Orders) pertaining to the Facility Site or said buildings,
facilities, improvements or other structures located thereon.
(ii) the right from time to time to remove, relocate, substitute,
use or connect to any of the Leased Dickerson Improvements, in the Ground
Lessor's discretion
13
exercised in a commercial and reasonable manner, provided, however, that in no
event shall such removal, relocation, substitution, use or connection,
individually or in the aggregate, have a material adverse effect on the use or
operation of the Facility Site as contemplated herein or of the Facility as
contemplated by the Operative Documents or herein or preclude the use or
operation of the Facility Site in substantially the same manner and to
substantially the same extent as was permitted prior to any such removal,
relocation, substitution, use or connection, and shall not diminish, other than
in an immaterial respect, the current and residual value, remaining useful life
or utility of the Facility as measured immediately prior to such removal,
relocation, substitution, use or connection, assuming the Facility shall then be
in the condition required to have been maintained by the terms of the Facility
Lease, or cause the Facility to become "limited use" property within the meaning
of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647.
(b) If the Facility Lease has terminated and the Ground Lessor uses or
intends to use the Leased Dickerson Improvements in connection with power
generation facilities other than the Facility, the Ground Lessor and the Ground
Lessee shall cooperate with each other and use good faith efforts to negotiate
and enter into an agreement setting forth their respective rights and
obligations with respect to the Leased Dickerson Improvements, including,
without limitation, the rights and obligations of the parties regarding use,
condemnation, casualty, maintenance, repair and insurance of the Leased
Dickerson Improvements; provided, that in all events the Ground Lessee shall be
permitted to use and operate the Facility Site and the Facility in the same
manner and to the same extent as it was entitled to do as prior to the Ground
Lessor's contemplated use of the Leased Dickerson Improvements in connection
with other power generation facilities, provided further, that to the extent the
Leased Dickerson Improvements and the Site Improvements are occupied or
otherwise used by the Ground Lessor, its agents, licensees, invitees, employees,
lessees, sublessees, successors and assigns, the Ground Lessor shall pay its
share of expenses relating to the Ground Lessor's, its agents', licensees',
invitees', employees', lessees', sublessees', successors' and assigns' actual
use thereof to be determined from time to time.
(c) As used in this Facility Site Lease, the phrase "use or
operation", "use and operation" or any similar phrase shall be deemed to
include, to the extent otherwise permitted under the terms of this Facility Site
Lease, the maintenance, repair, upgrade, addition to, alteration, removal,
restoration, replacement, modification, relocation and expansion of the
improvements in question (including roads, paths, walkways, sanitary sewers,
storm drains, water and gas mains, waste disposal systems, electric power lines,
pipelines, telephone, television or telecommunication lines, fire protection
systems, safety sensor and monitor systems and utility lines and systems).
Section 4.4. No Liability for Exercise of the Ground Lessor's Rights.
(a) The exercise by the Ground Lessor of any of the rights set forth
in and in accordance with Section 4.2 and 4.3 hereof (i) shall not be deemed to
be a breach of the
14
covenant of quiet enjoyment set forth in Section 4.1 hereof nor of any other
provision of this Facility Site Lease, (ii) shall not entitle the Ground Lessee
to any compensation or diminution or abatement of rent therefor, and (iii) shall
not be deemed a constructive or actual eviction or otherwise be grounds for
terminating or modifying this Facility Site Lease.
(b) The Ground Lessee shall provide within thirty (30) days of
request, an Officer's Certificate of the Ground Lessee to the effect that (i)
such grant, creation or release described in Section 4.2 hereof, (ii) such
development, construction, use, operation or maintenance described in Section
4.3(a)(i) hereof, or (iii) such removal, relocation, substitution, use or
connection described in Section 4.3(a)(ii) hereof, either (x) complies with
Sections 4.2 and 4.3 hereof or (y) does not comply with Section 4.2 and 4.3
hereof and stating in reasonable detail the basis of any such non- compliance.
If the Officer's Certificate of the Ground Lessee indicates non-compliance,
except in the case of any emergency, the Ground Lessor shall not undertake,
and/or shall cease to pursue the action in question, until such time as the
Ground Lessor and the Ground Lessee, each acting reasonably and in good faith,
resolve such issues of non-compliance
Section 4.5. Release Rights and Reserved Rights Binding on Third
Parties.
The Ground Lessee agrees that during the Site Lease Term, the Ground
Lessee will not (a) sublease or assign this Facility Site Lease or (b) otherwise
encumber, cause to be encumbered or convey all or part of the Ground Lessee's
interest hereunder, unless such sublease, assignment, encumbrance or conveyance
expressly provides that the Ground Lessee's interest under this Facility Site
Lease is subject to the Ground Lessor's Release Rights and reserved rights set
forth in Sections 4.2 and 4.3 hereof and that any such sublease, assignment,
encumbrance or conveyance shall automatically be subject to such rights without
the necessity of the execution, delivery or recording of any further instrument
whatsoever. Notwithstanding the foregoing, to the extent that any further
instrument shall be required to effect such release, upon the request of the
Ground Lessor, the Ground Lessee shall use commercially reasonable efforts to
cause the beneficiary of any such sublease, assignment, encumbrance or
conveyance to execute (in recordable form to the extent required) and deliver
any such further instrument which shall be prepared by the Ground Lessor at its
expense and shall be in form and substance reasonably satisfactory to such
beneficiary.
SECTION 5. USE OF THE GROUND INTEREST BY THE GROUND LESSEE
The Ground Lessee's rights hereunder to use the Facility Site shall be
limited to the right of the Ground Lessee to use the Facility Site during the
Site Lease Term in connection with the use, operation and maintenance of the
Facility in accordance with the terms of the Operative Documents and all
Requirements of Law (including the FERC Orders and any renewal or extension of
such FERC Orders, if applicable), which shall include the right to operate, use,
and repair the Leased Dickerson Improvements, all as are reasonably necessary
for the commercial operation of the Facility, provided, however, that the Ground
Lessee shall not be obligated to comply with any Requirements of Law (x) whose
application or validity is being contested
15
diligently and in good faith by appropriate proceedings for the time period of
such contest or (y) compliance with which shall have been excused or exempted by
a nonconforming use permit, waiver, extension or forbearance exempting it from
such Requirements of Law, so long as, in the case of each of clauses (x) or (y)
above, such failure of compliance does not result in any material danger of (i)
any sale, forfeiture or loss of any part of the Ground Interest, or (ii) the
subjection of the Ground Interest to any Lien, other than Permitted Liens or
(iii) any unindemnified liability or any criminal liability on the part of the
Ground Lessor; provided, however, that at all times during the term of the
Facility Site Sublease, the Ground Lessor, pursuant to the Facility Site
Sublease, shall be obligated to perform, and the Ground Lessee shall be deemed
to have performed, the obligations under this Section 5. The Ground Lessee
hereby covenants and agrees to indemnify and save the Ground Lessor harmless
from any and all costs and expenses, including reasonable attorneys fees,
incurred in connection with the Ground Lessee's failure to comply with any
Requirement of Law which it is obligated to comply with as contemplated above.
Notwithstanding any provision contained in this Facility Site Lease or in any
other Operative Document to the contrary, the Ground Lessee has the right to
perform any and all acts required by any Requirement of Law (including any order
of the FERC or its successor) affecting the Facility or the Facility Site
without the prior approval of the Ground Lessor or any other party to the
Operative Documents.
SECTION 6. TRANSFER OF THE GROUND INTEREST
The Ground Lessee expressly agrees that it shall not transfer its Ground
Interest except as provided herein or as part of the Ground Lessee's transfer of
the Owner Lessor's Interest in accordance with the Operative Documents. The
Ground Lessor acknowledges (a) that the Ground Lessee shall have the right to
sublease the Ground Interest without the consent of any Lease Financing Party to
the Ground Lessor, upon the terms and conditions set forth in the Facility Site
Sublease, (b) that the Ground Lessee shall have the right to transfer and convey
the Ground Interest as part of a transfer under and in accordance with Section
10.2, 13.3, 14.4, 18.1(c) or 18.1(e) of the Facility Lease in connection with
the Ground Lessee's transfer thereunder of the Owner Lessor's Interest and the
Ground Lessor and the Ground Lessee agree to comply with the provisions of the
applicable sections of the Facility Lease in connection with such transfer to
the extent required thereunder, (c) that the Ground Lessee's interest hereunder
may be transferred together with the Owner Lessor's Interest under the Facility
Lease to a Leasehold Mortgagee (including the Lease Indenture Trustee) or an
Affiliate thereof or any other Person who is the purchaser thereof in
foreclosure of the Lien granted to any such Leasehold Mortgagee (including that
granted under the Lease Indenture) or by deed in lieu of any such foreclosure or
after any such foreclosure or deed in lieu of foreclosure and (d) at all times
after the expiration or termination, for any reason whatsoever, of the Facility
Lease, the Ground Lessee may transfer or assign its rights and obligations under
this Facility Site Lease, or permit the sublease, sub-sublease or occupancy of
the Ground Interest or the Facility to or by any third person with the prior
written consent of the Ground Lessor and, if the Lien of the Lease Indenture has
not been discharged, the Lease Indenture Trustee (such consents not to be
unreasonably withheld), subject, however, to the rights of an operator appointed
pursuant to, and in accordance with the provi-
16
sions of, the Ownership and Operation Agreement. With respect to an assignment
only, the Ground Lessee shall be relieved of its obligations under this Facility
Site Lease from and after the date of such transfer or assignment so long as the
transfer or assignment is made in accordance with clause (d) above and the
transferee or the assignee assumes and agrees to perform all obligations and
liabilities of the Ground Lessee under this Facility Site Lease pursuant to such
agreements, and on such terms, as shall be reasonably satisfactory to the Ground
Lessor and if the Lien of the Lease Indenture has not been discharged, the Lease
Indenture Trustee.
SECTION 7. LIENS
Section 7.1. Liens by the Ground Lessee. The Ground Lessee hereby
covenants that it will not, directly or indirectly, create, incur, assume or
suffer to exist any Owner Lessor Liens, Owner Participant Liens or other
encumbrances on or with respect to the Ground Interest, the Facility Site, or
the Ground Lessor's title thereto or interest therein, as the case may be, other
than the Liens created for the benefit of a Leasehold Mortgagee (including the
Lease Indenture) any Liens existing upon return of the Facility to the Ground
Lessee pursuant to the Facility Lease, any Permitted Liens, and any Liens
permitted by this Facility Site Lease. The Ground Lessee shall promptly notify
the Ground Lessor of the imposition of any such Owner Lessor Liens, Owner
Participant Liens, or other encumbrances not permitted above of which the Ground
Lessee is aware and shall promptly, at its own expense, take such action as may
be necessary to fully discharge or release any such Lien or contest any such
Lien in good faith and with due diligence by appropriate legal proceedings and
provided that the Ground Lessee shall provide the Ground Lessor with reasonable
security as may be required by the Ground Lessor in connection with any such
contest. Notwithstanding the foregoing provisions of this Section 7.1, during
the Site Sublease Term, the Ground Lessee's sole obligation under this Section
7.1 shall be to fulfill its obligations under Section 7.2 of the Participation
Agreement.
Section 7.2. Liens by the Ground Lessor. The Ground Lessor hereby
covenants that it will not, directly or indirectly, create, incur, assume or
suffer to exist any Liens or other encumbrances on or with respect to the Leased
Dickerson Improvements or the Facility Land, other than Permitted Liens. The
Ground Lessor shall promptly notify the Ground Lessee of the imposition of any
such Lien or other encumbrances described in the immediately preceding sentence
of which the Ground Lessor is aware and shall promptly, at its own expense, take
such action as may be necessary to fully discharge or release any such Lien or
contest any such Lien in good faith and with due diligence by appropriate legal
proceedings and provided that the Ground Lessor shall provide the Ground Lessee
with reasonable security as may be required by the Ground Lessee in connection
with any such contest. This Section 7.2 shall be subject to and not in
derogation of Section 8.2 of the Participation Agreement.
SECTION 8. MAINTENANCE AND REPAIR
The Ground Lessee, at its own expense, will cause (a) the Facility Site
to be maintained in all material respects in compliance with all Requirements of
Law, including without
17
limitation, all applicable Environmental Laws, unless such noncompliance could
not reasonably be expected to result in a Material Adverse Effect or involve any
(1) material risk of foreclosure, sale, forfeiture or loss of, or imposition of
a Lien on, the Facility Land or the Leased Dickerson Improvements or the
impairment of the use, operation or maintenance of the Facility Land or the
Leased Dickerson Improvements in any material respect, (2) risk of criminal
liability being incurred by the Ground Lessor or (so long as the Lien for the
benefit of a Leasehold Mortgagee (including the Lease Indenture) has not been
discharged) a Leasehold Mortgagee (including the Lease Indenture Trustee) or (3)
material risk of any material adverse effect on the interests of the Ground
Lessor or (so long as the Lien for the benefit of a Leasehold Mortgagee
(including the Lease Indenture) has not been discharged) a Leasehold Mortgagee
(including the Lease Indenture Trustee) or any of their respective Affiliates
(including, without limitation, subjecting any such Person to regulation as a
public utility under any Requirement of Law) and (b) the Leased Dickerson
Improvements to be maintained in as good condition, repair and working order as
when delivered to the Ground Lessee at the end of the Site Sublease Term,
ordinary wear and tear excepted, and in any event, in all material respects (i)
in accordance with Prudent Industry Practice, (ii) in compliance with all
easements now existing or hereafter entered into in accordance with this
Facility Site Lease with respect to the Leased Dickerson Improvements, and (iii)
in accordance with the terms of all insurance policies required to be maintained
pursuant to this Facility Site Lease, provided, further, however, that at all
times during the term of the Facility Site Sublease, the Ground Lessor, pursuant
to the Facility Site Sublease, shall be obligated to perform, and the Ground
Lessee shall be deemed to have performed, the obligations under this Section 8.
SECTION 9. SITE IMPROVEMENTS
Section 9.1. Required Site Improvements. The Ground Lessee, without
expense to the Ground Lessor and without the consent of any other Lease
Financing Party, shall make or cause to be made any modifications, alterations,
additions or other improvements to the Facility Site, which for all purposes
hereof shall be deemed to exclude Non-Severable Improvements (the "Site
----
Improvements") as they relate to the Ground Interest as are required (a) by
- ------------
Requirements of Law or any Governmental Authority having jurisdiction thereon,
(b) by any insurance policies required to be maintained by the Ground Lessee
under any Operative Document, or (c) by the Operative Documents (each, a
"Required Site Improvement"); provided, however, that the Ground Lessee may, in
- --------------------------
good faith and by appropriate proceedings, diligently contest the validity or
application of any Requirement of Law or any modifications, alterations,
additions or other improvements required by any Governmental Authority, in any
reasonable manner which does not involve any material risk of (i) foreclosure,
sale, forfeiture or loss of, or imposition of a Lien (other than a Permitted
Lien) on any part of the Facility Site or impair the use, operation or
maintenance of the Facility Site in any material respect, or (ii) any criminal
liability being incurred by, or any material adverse effect on the interests of,
the Ground Lessor (including any Material Adverse Effect), the Owner
Participant, the Ground Lessee, or any other Lease Financing Party, including,
without limitation, subjecting any such person to regulation as a public utility
under Requirement of Law, provided, further, however, that at all times during
the
18
term of the Facility Site Sublease, the Ground Lessor, pursuant to the
Facility Site Sublease, shall be obligated to perform, and the Ground Lessee
shall be deemed to have performed, the obligations under this Section 9.1.
Section 9.2. Optional Site Improvements. The Ground Lessee at any
time may, without expense to the Ground Lessor and without the consent of any
other Lease Financing Party, make or cause to be made any Site Improvement as
the Ground Lessee considers necessary or desirable in the proper conduct of its
business (any such non-Required Site Improvement being referred to as an
"Optional Site Improvement"); provided that no Optional Site Improvement to the
- --------------------------
Facility Site shall, other than in an immaterial respect, diminish the current
or residual value, remaining useful life or utility of the Leased Dickerson
Improvements below the current or residual value, remaining useful life or
utility thereof immediately prior to such Optional Site Improvement, assuming
the Leased Dickerson Improvements shall then be in the condition required to
have been maintained by the terms of this Facility Site Lease, or cause the
Leased Dickerson Improvements to become "limited use" property, within the
meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B.
647.
Section 9.3. Title to Site Improvements. Title to an undivided interest
equal to the Owner Lessor's Percentage in all Site Improvements (other than
Optional Site Improvements that are severable ) shall automatically vest in the
Ground Lessor upon being affixed to or incorporated into the Facility Site, and
such undivided interest shall immediately (a) become subject to this Facility
Site Lease, and (b) be deemed part of the Ground Interest for all purposes of
this Facility Site Lease. Title to Optional Site Improvements that are severable
shall automatically vest in the Ground Lessee.
SECTION 10. EASEMENTS
Section 10.1. Reservation of Easements by Ground Lessor on Facility Site.
Ground Lessor does hereby reserve unto itself, its successors and assigns, on
certain portions of the Facility Site shown by cross-hatching on Exhibit H
---------
attached hereto and made a part hereof (the "Facility Site Easement Areas") the
----------------------------
non-exclusive easements (the "Facility Site Easements") set forth on Exhibit E
----------------------- ---------
attached hereto.
Section 10.2. Grant of Easements from Ground Lessor to Ground Lessee on
Retained Dickerson Land. Ground Lessor does hereby give, grant and convey to
Ground Lessee on certain portions of the Retained Dickerson Land shown by cross-
hatching on Exhibit H attached hereto and made a part hereof (the "Retained
--------- --------
Dickerson Land Easement Areas"); the non-exclusive easements (the "Retained
- ----------------------------- --------
Dickerson Land Easements") set forth on Exhibit F attached hereto.
- ------------------------ ---------
Section 10.3. Grant of Easements from Southern Ash to Ground Lessee on
the Westlands Flyash Facility Site. Southern Ash does hereby give, grant and
convey to Ground Lessee on the Westlands Flyash Facility Site shown by cross-
hatching on Exhibit H attached hereto and made a part hereof (the "Westlands
--------- ---------
Flyash Facility Site Easement Areas"; together
- -----------------------------------
19
with the Facility Site Easement Areas and the Retained Dickerson Land Easement
Areas, the "Easement Areas") the non-exclusive easements (the "Westlands Flyash
-------------- ----------------
Facility Site Easements") set forth on Exhibit G attached hereto.
- -----------------------
Section 10.4. Access to Easement Areas. Ground Lessor, Ground Lessee and
Southern Ash agree each have access to the Easement Areas to enjoy the full use
and benefit of each of their rights under the Facility Site Easements, the
Retained Dickerson Land Easements and the Westlands Flyash Facility Site
Easements, as applicable. Employees and agents of Ground Lessor, Ground Lessee
and Southern Ash, and their applicable vendors shall, while on a party's
Easement Area, comply with such party's rules and regulations, including without
limitation security requirements. The reservation of easements by the Ground
Lessor hereunder, the easements hereby granted to Ground Lessee by Ground Lessor
and the easements hereby granted by Southern Ash to Ground Lessee include
without limitation reasonable access, in accordance with Prudent Industry
Practice, to the applicable Easement Areas which access shall be by means of a
route or routes from time to time reasonably designated by Ground Lessor with
respect to the Retained Dickerson Land, Ground Lessee with respect to the
Facility Site and Southern Ash with respect to the Westlands Flyash Facility
Site; provided, however that such route or routes shall be of such width, load
bearing capacity, turning radii, slope and other criteria as shall permit the
grantee of the easements, its officers, directors, employees, agents,
contractors, invitees, successors and assigns to accomplish the purposes of the
easements reserved or conferred herein.
Section 10.5. Maintenance of Easement Areas. Ground Lessor, at Ground
Lessor's cost, shall maintain all improvements, equipment and facilities of
Ground Lessor on the Retained Dickerson Land Easement Areas in accordance with
Prudent Industry Practice. Southern Ash, at Southern Ash's cost, shall maintain
all improvements, equipment and facilities of Southern Ash on the Westlands
Flyash Facility Site in accordance with Prudent Industry Practice. From and
after the expiration, surrender or termination of the Site Sublease Term and
until the earlier of the expiration, surrender or termination of the Site Lease
Term pursuant to and in accordance with this Facility Site Lease, the Ground
Lessee, at Ground Lessor's cost, shall maintain all improvements, equipment and
facilities of Ground Lessee on the Facility Site Easement Areas in accordance
with Prudent Industry Practice.
Section 10.6. Use of Easement Areas. Subject to the terms and provisions
of this Facility Site Lease (including but not limited to the rights expressly
granted to Ground Lessee herein) and without materially impairing the rights of
Ground Lessee to use the Facility Site, the Retained Dickerson Land Easements or
the Westlands Flyash Facility Site Easements in connection with the use,
operation and maintenance of the Facility, Ground Lessor shall be entitled to
use of the Retained Dickerson Land for such uses and purposes as Ground Lessor
may deem fit in Ground Lessor's sole discretion and Southern Ash shall be
entitled to use of the Westlands Flyash Facility Site for such uses and purposes
as Southern Ash may deem fit in Southern Ash's sole discretion. Subject to the
terms and provisions of this Facility Site Lease (including but not limited to
the rights expressly granted to Ground Lessor or Southern Ash
20
herein), and without materially impairing the rights of Ground Lessor to use the
Retained Dickerson Land, or the rights of Southern Ash to use the Westlands
Flyash Facility Site, in connection with the use, operation and maintenance of
the facilities located thereon, Ground Lessee shall be entitled to use the
Facility Site for such uses and purposes as Ground Lessee may deem fit in Ground
Lessee's sole discretion.
Section 10.7. Relocation of Easements. Notwithstanding anything to the
contrary contained herein, each party agrees that upon the written request of a
party (the "Requesting Party"), the other parties (collectively, the "Other
---------------- -----
Party") will consent and cause its Affiliates to consent to the relocation of
- -----
the applicable portion of the Easement Area provided that (a) the Requesting
Party pays the cost of such relocation including but not limited to costs
related to the moving or rebuilding (or both) of any facilities in connection
with such relocation, (b) such relocation will be to a portion of (x) the
Retained Dickerson Land (if the relocation is of a Retained Dickerson Land
Easement) approved by the Other Party, the Facility Site (if the relocation is
of a Facility Site Easement) approved by the Other Party or the Westlands Flyash
Facility Site (if the relocation is of a Westlands Flyash Facility Site
Easement) approved by the Other Party, (c) such relocation will not materially
adversely affect the use or operation of the facilities located thereon except
for the minimum downtime associated with the cut-over for such relocation
process in accordance with Prudent Industry Practice or materially adversely
affect the use or operation of the facilities benefitting from such easement,
(d) the Requesting Party's request for relocation is not inconsistent with
Prudent Industry Practice, (e) such relocating does not materially diminish the
size and scope of the easement as it existed prior to such relocation and does
not otherwise materially decrease the Other Party's rights hereunder, (f) such
actions shall not diminish, other than in an immaterial respect, the current and
residual value, remaining useful life or utility of the facilities located
thereon as measured immediately prior to such actions, and (g) the Requesting
Party obtains and delivers to the Other Party executed counterparts (in
recordable form) of all documents necessary to grant and convey to the Other
Party all the applicable easements and rights under this Facility Site Lease
with respect to the relocation of the applicable portion of the Easement Area.
Notwithstanding the foregoing, prior to the expiration or termination of the
Site Sublease Term, any party may relocate easements burdening such party's
land, without the consent of the other parties, provided such party complies
with items (a) through (g) above. If a party relocates an easement burdening
such party's land pursuant to the provisions of the immediately preceding
sentence, such party shall (i) make reasonable efforts to notify the other
parties of any such relocation and (ii) upon the request of a party, enter into
an amendment to this Facility Site Lease to accurately reflect the relocated
easement, including, in connection therewith, providing a revised plan
(substantially similar to the ones set forth on Exhibit H) of the relocated
---------
easement, all at the cost and expense of the party relocating the easement. In
addition, a party may from time to time request of any other party whether such
other party has relocated any easements and such other party shall promptly
respond by confirming that no relocations have been implemented or setting forth
in reasonable detail any easements relocated as contemplated above.
21
Section 10.8. Modifications to Easement Areas; Rules and Regulations. A
Requesting Party shall have the right from time to time to (A) close temporarily
all or any portion of the Easement Areas for the purpose of making repairs,
changes or alterations thereto or performing necessary maintenance in connection
with any emergency (including closings resulting from adverse weather
conditions) or for any other commercially reasonable purpose whatsoever which is
not in consistent with Prudent Industry Practice, or (B) establish, modify and
enforce rules and regulations with respect to the Easement Areas, provided,
however, that such closings or rules and regulations, individually or in the
aggregate, shall not materially decrease the Other Party's rights and benefits
hereunder, shall not have a material adverse effect on the use or operation of
the facilities located thereon or the facilities benefitting from the easements
encumbering the Easement Area in question, and shall not diminish, other than in
an immaterial respect, the current and residual value, remaining useful life or
utility of the relevant facilities as measured immediately prior to such
actions, or cause the relevant facilities to become "limited use" property
within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30,
1976-2 C.B. 647.
Section 10.9. Abandonment. If the Ground Lessor or the Ground Lessee
decides to permanently abandon the use of the easements provided to it herein or
any portion thereof, then the abandoning party shall notify the applicable other
party and shall cause a release of such easement or portion thereof, whichever
is applicable, to be recorded in the appropriate county clerk's office or other
office for recording real estate documents.
Section 10.10. Damage or Destruction. All damage to or destruction of the
Retained Dickerson Land, the Facility Site or the Westlands Flyash Facility
Site, as the case may be (including, without limitation, the applicable Easement
Areas) resulting from the exercise of the easement rights contained herein or
use of the applicable Easement Area by Ground Lessor or Ground Lessee, as the
case may be, their respective officers, directors, employees, agents,
contractors or invitees shall be promptly repaired and/or restored by Ground
Lessor (if the damage or destruction was caused to the Facility Site after the
expiration or termination of the Site Sublease Term) or Ground Lessee (if the
damage or destruction was caused to the Retained Dickerson Land or the Westlands
Flyash Facility Site after the expiration or termination of the Site Sublease
Term) to at least the condition that existed immediately prior to such damage or
destruction, at the sole cost and expense of the party who caused such damage or
destruction.
Section 10.11. Interference with Use. Ground Lessor hereby agrees not to
materially interfere with the use of the Retained Dickerson Land Easement Area
by Ground Lessee as contemplated by the Operative Documents. Ground Lessee
hereby agrees not to materially interfere with the current use of the Retained
Dickerson Land Easement Area by Ground Lessor as contemplated by the Operative
Document. Ground Lessee hereby agrees not to materially interfere with the
current use of the Westlands Flyash Facility Site Easement Area by Southern Ash,
subject to Ground Lessee's rights set forth herein. Ground Lessor hereby agrees
not to materially interfere with the use of the Facility Site Easement Area by
Ground Lessee as contemplated by the Operative Documents. Ground Lessee hereby
agrees not to materially
22
interfere with the current use of the Facility Site Easement Area by Ground
Lessor as contemplated by the Operative Documents. Southern Ash hereby agrees
not to materially interfere with the use of the Westlands Flyash Facility Site
Easement Area by the Ground Lessee as contemplated herein.
Section 10.12. No Cost. Each easement granted herein may be enjoyed
without charge or fee to the grantee of the easement.
Section 10.13. Covenants Running with the Land. The terms, conditions and
easement rights contained herein shall be perpetual and shall be covenants
running with the land as a burden upon the Retained Dickerson Land and Retained
Dickerson Land Easement Area, the Facility Site and the Facility Site Easement
Area and the Westlands Flyash Facility Site and the Westlands Flyash Facility
Site Easement Area, as applicable.
SECTION 11. INSURANCE
From and after the expiration or termination of the Site Sublease Term
and until the earlier of the expiration, surrender or termination of the Site
Lease Term pursuant to and in accordance with this Facility Site Lease, the
Ground Lessee shall maintain with financially sound and reputable insurance
companies insurance in such amounts against such risks, loss, damage and
liability as are customarily insured against by other enterprises of like size
and type as that of the enterprises located on the Facility Site (including the
Facility), subject to the availability of such coverage on commercially
reasonable terms, all on terms and conditions which are in accordance with
Prudent Industry Practice.
SECTION 12. EVENTS OF LOSS, CONDEMNATION, DAMAGE OR DESTRUCTION
(a) If at any time during the Site Sublease Term an Event of Loss
occurs or a Requisition occurs or other casualty occurs, the terms and
provisions of the Facility Lease shall govern and control the rights and
obligations of the parties hereto.
(b) If at any time after the expiration or termination, for any reason
whatsoever, of the Site Sublease Term and until the earlier of the expiration,
surrender or termination of the Site Lease Term, the Ground Interest or any
portion thereof is the subject of a Requisition, the proceeds of such
Requisition shall be divided between the Ground Lessor and the Ground Lessee in
the proportions specified in the condemnation award or agreement of transfer or,
if not so specified, in proportion to the fair market value of the Ground
Lessor's and the Ground Lessee's respective interests in the Ground Interest;
provided that so long as the Lien for the benefit of a Leasehold Mortgagee
(including the Lease Indenture) shall not have been terminated or discharged,
all amounts payable to the Ground Lessee pursuant to this clause (b) shall be
payable to the Leasehold Mortgagee (including the Lease Indenture Trustee) for
application pursuant to the security documents of such Leasehold Mortgagee
(including the Lease Indenture).
23
(c) Subject to and without limiting the parties' obligations under the
other Operative Documents, if the Facility or any part thereof is damaged or
destroyed during the term of the Facility Lease by any fire or other casualty,
the Ground Lessee shall have no obligation to repair or replace the Facility,
and any insurance proceeds received by the Ground Lessee shall be distributed in
accordance with the Facility Lease.
(d) If, at any time after expiration or termination, for any reason
whatsoever, of the Site Sublease Term and until the earlier of the expiration,
surrender or termination of the Site Lease Term, the Facility or any part
thereof is damaged or destroyed by any fire or other casualty, the Ground Lessee
shall not, except to the extent expressly required under any other Operative
Document or under Requirements of Law, be obligated to repair or replace the
Facility, notwithstanding the availability of insurance proceeds for repair. If
the Ground Lessee elects not to repair such damage, the Ground Lessee may
terminate this Facility Site Lease by giving sixty (60) days' prior written
notice to the Ground Lessor. All proceeds received by the Ground Lessee from
insurance with respect to any casualty or property damage occurring on or after
expiration or termination of Site Sublease Term, but during which period this
Facility Site Lease remains in effect shall be applied first to pay any past due
amounts then payable to the Ground Lessor and/or any of its Affiliates pursuant
to this Facility Site Lease and thereafter shall be applied as the Ground Lessee
may elect; provided that so long as the Lien for the benefit of a Leasehold
Mortgagee (including the Lease Indenture) shall not have been terminated or
discharged, all amounts payable to the Ground Lessee pursuant to this clause (d)
shall be payable to the Leasehold Mortgagee (including the Lease Indenture
Trustee) for application pursuant to the security documents of such Leasehold
Mortgagee (including the Lease Indenture).
(e) To the extent that a Requisition occurs with respect to the
Undivided Interest after the expiration or termination of the Site Sublease Term
and until the earlier of the expiration, surrender or termination of the Site
Lease Term, provided the Ground Lessee shall have retained the Undivided
Interest, the proceeds of such Requisition shall be paid solely to the Ground
Lessee.
(f) From and after the expiration or termination of the Site Sublease
Term and until the earlier of the expiration, surrender or termination of the
Site Lease Term pursuant to and in accordance with this Facility Site Lease:
(i) upon an Event of Loss described in clauses (i) or (ii) of the
definition of Event of Loss, the Ground Lessee may terminate this Facility Site
Lease, and
(ii) upon an Event of Loss described in clause (iii) (without
regard to the provisos in such clause (iii) and, in the case of a Requisition of
use, only if such Requisition of use continues beyond the last day of the Basic
Site Lease Term or any Renewal Site Lease Term then in effect) of the definition
of Event of Loss, this Facility Site Lease shall automatically terminate.
24
SECTION 13. WAIVER OF PARTITION
To the maximum extent permitted by Requirements of Law, each of the
Ground Lessor and the Ground Lessee, on its own behalf and on behalf of its
successors and assigns, hereby waives any right, whether pursuant to statute or
common law, to partition the Facility Site or any interest or portion thereof
(other than the Released Property), including the Ground Interest or any
interest or portion thereof and such waiver shall remain in effect until
expiration or termination of the Site Lease Term. Each of the Ground Lessor and
the Ground Lessee agrees not to commence during such period any action of any
kind seeking any form of partition with respect thereto. Each of the Ground
Lessor and the Ground Lessee agrees to incorporate this waiver in all deeds,
deeds of trust, mortgages, and instruments of conveyance relating to the
Facility Site or any interest or portion thereof (other than the Released
Property), whether delivered at the Closing or thereafter.
SECTION 14. GROUND LESSOR'S RIGHT TO PERFORM
From and after the expiration or termination of the Site Sublease Term
and until the earlier of the expiration, surrender or termination of the Site
Lease Term pursuant to and in accordance with this Facility Site Lease, if the
Ground Lessee fails to make any payment required to be made by it hereunder or
fails to perform or comply with any of its other agreements contained herein
after notice to the Ground Lessee and failure of the Ground Lessee to so perform
or comply within ten (10) days thereafter, the Ground Lessor may itself make
such payment or perform or comply with such agreement in a reasonable manner,
but shall not be obligated hereunder to do so, and the amount of such payment
and of the reasonable expenses of the Ground Lessor incurred in connection with
such payment or the performance of or compliance with such agreement, as the
case may be, together with interest thereon at the Overdue Rate, to the extent
permitted by Requirements of Law, shall be immediately due and payable by the
Ground Lessee to the Ground Lessor on demand.
SECTION 15. SECURITY FOR THE GROUND LESSEE'S OBLIGATION UNDER THE LESSOR NOTES
Section 15.1. Security for the Ground Lessee's Obligation under the
Lessor Notes
Subject to Section 15.2 of this Facility Site Lease, during the Site
Lease Term, the Ground Lessee shall have the right to encumber, mortgage, pledge
or hypothecate its interest in this Facility Site Lease or the Ground Interest
and to grant an assignment of the rents, issues and profits from the Ground
Interest (any such encumbrance, mortgage, pledge, hypothecation or assignment, a
"Leasehold Lien") in favor of or to the Lease Indenture Trustee or, upon the
--------------
assignment or discharge of the Lien of the Lease Indenture, to any lender
providing leasehold mortgage financing to the Ground Lessee (collectively a
"Leasehold Mortgagee"). In order to secure the Lessor Notes, or obligations to
-------------------
a Leasehold Mortgagee, the Ground Lessee will assign
25
and grant a Lien to the Lease Indenture Trustee (or other Leasehold Mortgagee)
of all of the Ground Lessee's right, title and interest in, to and under this
Facility Site Lease (other than Excepted Payments). The Ground Lessor hereby
consents to such assignment and to the creation of such Lien and security
interest (and any sale arising from or in connection with the exercise of
remedies) and acknowledges receipt of a copy of the Lease Indenture, it being
understood that such consent shall not affect any requirement or the absence of
any requirement for any consent of the Ground Lessor under any other
circumstances. Unless and until the Ground Lessor shall have received written
notice from the Lease Indenture Trustee that the Lien created under the Lease
Indenture has been fully released, the Lease Indenture Trustee shall have the
right to exercise the rights of the Ground Lessee under this Facility Site Lease
to the extent set forth in and subject in each case to the exceptions set forth
in the Lease Indenture.
Section 15.2. Limitations on Granting Leasehold Liens
Notwithstanding anything herein to the contrary, other than the Lien of
the Lease Indenture, the Ground Lessee shall not be permitted to grant a
Leasehold Lien on the Ground Interest until the later to occur of (i) all
obligations secured by the Lien of the Lease Indenture have been paid in full in
accordance with the terms thereof and (ii) the expiration or termination of the
Facility Lease.
Section 15.3. Discharge of Leasehold Liens
No surrender or termination of this Facility Site Lease, shall be
effective unless and until any and all Leasehold Liens encumbering the Ground
Interest shall have been discharged. The Ground Lessee shall obtain and record,
at its cost and expense (except as otherwise provided under the Operative
Documents) any discharge, release or other document required in order to
effectuate such release. The obligations of the Ground Lessee contained in this
Section 15.3 shall survive the expiration, surrender or termination of this
Facility Site Lease.
SECTION 16. NONMERGER OF REVERSIONARY INTEREST
The reversionary interest of the Ground Lessor in the Ground Interest
shall not merge into any interest in the Ground Interest conveyed by this
Facility Site Lease even if such reversionary interest and such interest leased
are at any time vested in or held directly or indirectly by the same Person, but
this Facility Site Lease shall nonetheless remain in full force and effect in
accordance with its terms notwithstanding such vesting or holding unless and
until the Person holding such interests shall execute an instrument affecting
such merger and shall duly record such instrument. No such instrument of merger
shall be executed and recorded unless and until the Lien for the benefit of a
Leasehold Mortgagee (including the Lease Indenture) has been discharged in
accordance with the terms thereof.
SECTION 17. MISCELLANEOUS
26
Section 17.1. Amendments and Waivers. No term, covenant, agreement or
condition of this Facility Site Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against which enforcement of the termination, amendment or waiver shall be
sought.
Section 17.2. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or shall be produced by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or next business day or courier service,
(b) in the case of notice by United States mail, certified or registered,
postage prepaid, return receipt requested, upon receipt thereof, or (c) in the
case of notice by such a telecommunications device, upon transmission thereof,
provided such transmission is promptly confirmed by either of the methods set
forth in clause (a) or (b) above, in each case addressed to such party and copy
party at its address set forth below or at such other address as such party or
copy party may from time to time designate by written notice to the other
parties:
If to the Ground Lessor:
Southern Energy Mid-Atlantic, LLC
1155 Perimeter Center West
Atlanta, Georgia 30338-4780
Telephone No.: (678) 579-5000
Facsimile No.: (678) 579-7001
Attention: President
with a copy to:
Southern Energy, Inc.
1155 Perimeter Center West
Atlanta, Georgia 30338-4780
Telephone No.: (678) 579-5000
Facsimile No.: (678) 579-6904
Attention: President, with a copy to General Counsel
If to the Ground Lessee:
Dickerson OL1 LLC
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
27
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
with a copy to the Owner Participant:
SEMA OP3 LLC
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
and to the Lease Indenture Trustee:
State Street Bank and Trust Company of Connecticut, National
Association
225 Asylum Street, Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Department
with a copy to:
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111
Telephone No.: (617) 662-1681
Facsimile No.: (617) 662-1465
Attention: Corporate Trust Department
If to Southern Ash:
Southern Energy MD Ash Management, LLC
1155 Perimeter Center West
Atlanta, Georgia 30338-4780
Telephone No.: (678) 579-5000
Facsimile No.: (678) 579-7001
Attention: President
with a copy to:
Southern Energy, Inc.
28
1155 Perimeter Center West
Atlanta, Georgia 30338-4780
Telephone No.: (678) 579-5000
Facsimile No.: (678) 579-6904
Attention: President, with a copy to General Counsel
Section 17.3. Survival. Except as expressly set forth herein, the
warranties and covenants made by each party hereto shall not survive the
expiration or termination of this Facility Site Lease.
Section 17.4. Successors and Assigns.
(a) This Facility Site Lease shall be binding upon and shall inure to
the benefit of, and shall be enforceable by, the parties hereto and their
respective successors and permitted assigns as permitted by and in accordance
with the terms hereof.
(b) Except as expressly provided herein or in the other Operative
Documents, the Ground Lessor may not assign or transfer any of its interests
herein without the consent of the other party hereto.
Section 17.5. Governing Law. This Facility Site Lease was negotiated in
the State of New York which the Ground Lessee and the Ground Lessor agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and, in accordance with (S) 5-1401 of the New York General
Obligations Law, in all respects, including matters of construction, validity
and performance, this Facility Site Lease shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and performed in such State and any applicable law of the United States of
America, except that the provisions for the creation and enforcement of the
------
leasehold interest created hereby shall be governed by and construed according
to the law of the state in which the Facility Site is located, it being
understood that, to the fullest extent not prohibited by the law of the state in
which the Facility Site is located, the law of the State of New York shall
govern the validity and the enforceability of the representations, warranties,
covenants and obligations of the Ground Lessee and the Ground Lessor under this
Facility Site Lease and all other Operative Documents (excluding the Lessor LLC
Agreement and the OP LLC Agreement, which shall be governed by and construed as
set forth therein) and all of the indebtedness arising hereunder or thereunder.
To the fullest extent permitted by law, the Ground Lessee and the Ground Lessor
hereby unconditionally and irrevocably waive any claim to assert that the law of
any other jurisdiction governs this Facility Site Lease, except as expressly
otherwise provided above.
Section 17.6. Severability. Any provision of this Facility Site Lease
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
29
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Section 17.7. Counterparts. This Facility Site Lease may be executed in
separate counterparts, each of which, when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
Section 17.8. Headings and Table of Contents. The headings of the
sections of this Facility Site Lease and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 17.9. Further Assurances. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by the other party, all as
may be reasonably necessary to carry out more effectively the intent and purpose
of this Facility Site Lease.
Section 17.10. Effectiveness of Facility Site Lease. This Facility
Site Lease has been dated as of the date first above written for convenience
only. This Facility Site Lease shall be effective on the date of execution and
delivery by the Ground Lessee and the Ground Lessor.
Section 17.11. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) this Facility Site Lease is executed
and delivered by the Owner Manager, not individually or personally but solely as
Owner Manager of the Ground Lessee under the Lessor LLC Agreement, in the
exercise of the powers and authority conferred and vested in it pursuant
thereto, (b) each of the representations, undertakings and agreements herein
made on the part of the Ground Lessee is made and intended not as a personal
representation, undertaking and agreement (as applicable) by the Owner Manager,
but is made and intended for the purpose for binding only the Ground Lessee, (c)
nothing herein contained shall be construed as creating any liability on the
Owner Manager, individually or personally, to perform any covenant either
expressly contained or implied herein, all such liability, if any, being
expressly waived by the parties hereto or by any Person claiming by, through or
under the parties hereto and (d) under no circumstances shall the Owner Manager
be personally liable for the payment of any indebtedness or expenses of the
Ground Lessee or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Ground Lessee
under this Facility Site Lease.
Section 17.12. Measuring Life. If and to the extent that any of the
rights and privileges granted under this Facility Site Lease, would, in the
absence of the limitation imposed by this sentence, be invalid or unenforceable
as being in violation of the rule against perpetuities or any other rule or law
relating to the vesting of interests in property or the suspension of the power
of alienation of property, then it is agreed that notwithstanding any other
provision of this Facility Site Lease, such options, rights and privileges,
subject to the respective conditions hereof governing the exercise of such
options, rights and privileges, will be exercisable only during (a)
30
the longer of (i) a period which will end twenty-one (21) years after the death
of the last survivor of the descendants living on the date of the execution of
this Facility Site Lease of the following Presidents of the United States:
Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy,
Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W.
Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided
under the Uniform Statutory Rule Against Perpetuities or (b) the specified
applicable period of time expressed in this Facility Site Lease, whichever of
(a) and (b) is shorter.
Section 17.13. Memorandum. A memorandum of this Facility Site Lease
shall be duly recorded against the Dickerson Land and the Westlands Flyash
Facility Site, for the purposes of memorializing the interests granted herein,
in the appropriate recorder's office located in Montgomery County, Maryland by
the Ground Lessor, at the Ground Lessor's expense.
SECTION 18. LENDER PROTECTIVE PROVISIONS
Section 18.1. Notices. No notice from the Ground Lessor hereunder
shall be effective unless it is also given to the Leasehold Mortgagee. Any
notice of default shall state the nature of the alleged default and shall
specify the amounts of rent or other payments herein provided for that are
claimed to be in default. The Leasehold Mortgagee shall be given notice of any
arbitration or other proceeding or dispute between the Ground Lessor and the
Ground Lessee and shall have the right to intervene therein and be made a party
thereto. Further, the Leasehold Mortgagee shall receive notice, and a copy, of
any award or decision made in said arbitration or other proceeding.
Section 18.2. Default and Cure Rights. During the existence of an
event of default by the Ground Lessee hereunder, the Ground Lessor shall accept
any curative acts undertaken by or at the instigation of the Leasehold Mortgagee
in accordance with the terms of this Section as if the same had been undertaken
by the Ground Lessee. If the Ground Lessor shall elect to terminate this
Facility Site Lease by reason of any event of default of the Ground Lessee, the
Leasehold Mortgagee shall have the right to postpone and extend the specified
date for the termination of this Facility Site Lease as fixed by the Ground
Lessor in its notice of termination, and in the event the Leasehold Mortgagee
fully complies with its obligations and fully cures such event of default within
the time periods specified below, no such termination shall be effected by the
Ground Lessor, so long as such Leasehold Mortgagee shall (and shall agree with
the Ground Lessor by giving a notice to that effect to the Ground Lessor) prior
to the effective date of termination, to commence and diligently pursue to
completion the following within the times hereinafter provided and shall, in
fact, accomplish the following within such time periods:
(i) cure or cause to be cured within thirty (30) days of such notice
any then-existing monetary defaults of which the Leasehold Mortgagee has
knowledge; and
(ii) pay or cause to be paid any future or ongoing payment or other
monetary obligations of the Ground Lessee hereunder, as the same fall due;
provided, the
31
Leasehold Mortgagee shall have such period of time (not to exceed thirty (30)
days after written notice thereof to the Leasehold Mortgagee) as is reasonably
necessary to cure any failure to pay any such amount when due; and
(iii) promptly cure or cause to be cured within thirty (30) days any
other defaults of which the Leasehold Mortgagee has knowledge and which the
Leasehold Mortgagee is capable of curing; provided the Leasehold Mortgagee shall
have an additional period (not to exceed an additional one hundred eighty (180)
days) as is reasonably necessary beyond such initial thirty (30) day period to
cure such default so long as the Leasehold Mortgagee diligently pursues the cure
of such default to completion; and
(iv) take steps to acquire or sell the Ground Lessee's interest in
this Facility Site Lease by foreclosure of the Leasehold Lien or otherwise, and
diligently prosecute to completion such steps, and in any event diligently
prosecute such steps to completion within two hundred forty (240) days after
notice of such proposed termination; provided, however that the Leasehold
Mortgagee shall have an additional period (not to exceed an additional three
hundred sixty-five (365) days) to complete such steps equal to the number of
days that the Leasehold Mortgagee is under any statutory or judicial restraint
restricting the taking or completion of such steps.
Section 18.3. Assignment. The Ground Lessee's interest in this
Facility Site Lease may be assigned pursuant to judicial or non-judicial
foreclosure or a conveyance in lieu of foreclosure (a "Foreclosure Transfer") to
--------------------
any Person, subject to the prior written consent of the Ground Lessor and, if
the Lien for the benefit of a Leasehold Mortgagee (including the Lease Indenture
Trustee) has not been discharged, the Leasehold Mortgagee (including the Lease
Indenture Trustee) (such consents not to be unreasonably withheld). Any such
transferee under a Foreclosure Transfer, and any Person that acquires the Ground
Lessee's interest under a new lease pursuant to Section 18.5 below may assign
this Facility Site Lease or such new lease and shall thereupon be released from
all liability as the Ground Lessee under this Facility Site Lease from and after
the date of such assignment.
Section 18.4. Extension Options. If the Ground Lessee fails to
exercise any option to extend the Site Lease Term within the time period set
forth herein for such exercise, then such extension option shall not expire
until: (a) the Ground Lessor has given the Leasehold Mortgagee written notice of
such failure to exercise; and (b) the Leasehold Mortgagee has failed for a
period of thirty (30) days following its receipt of such notice to exercise the
extension option. The Ground Lessor agrees to accept the exercise of an
extension option by the Leasehold Mortgagee within said period.
Section 18.5. New Agreement. If this Facility Site Lease, without the
consent of the Leasehold Mortgagee, is terminated for any reason prior to its
stated term, as the same may be extended, then the Ground Lessor shall, upon
written request from the Leasehold Mortgagee made within thirty (30) days after
such termination, enter into a new lease regarding the lease or
32
sublease, as applicable, of the Ground Interest with the Leasehold Mortgagee
timely requesting such a new agreement. The new agreement shall be on the same
terms and conditions as this Facility Site Lease (including any rights or
options to extend the Site Lease Term or acquire the Ground Interest) and shall
have the same priority as this Facility Site Lease; provided, that
notwithstanding the foregoing, the Ground Lessor shall not be responsible for
removing or satisfying any Lien which is not attributable to the Ground Lessor
or any of its Affiliates. The Ground Lessor's obligation to enter into the new
agreement shall be conditioned upon the following: (a) the Leasehold Mortgagee
shall have cured all monetary and nonmonetary defaults (capable of being cured
by the Leasehold Mortgagee) in the manner and time periods set forth in Section
18.2 hereof, and (b) the Leasehold Mortgagee shall reimburse the Ground Lessor
for all reasonable costs and expenses incurred in entering into the new
agreement.
Section 18.6. Amendment. The cancellation, surrender or material
amendment of this Facility Site Lease by the Ground Lessee shall not be
effective as against the Leasehold Mortgagee without the written consent of such
Leasehold Mortgagee, which consent shall not be unreasonably withheld or
delayed, except for any such cancellation, surrender or amendment of this
Facility Site Lease otherwise permitted pursuant hereto without consent of the
Leasehold Mortgagee.
Section 18.7. No Merger. In the event that the Ground Lessee acquires
the fee estate in the Ground Interest, the leasehold estate created pursuant to
this Facility Site Lease shall not merge out of existence but instead shall be,
become and continue as an encumbrance of the entire interests of the Ground
Lessee in the real property.
Section 18.8. Estoppel Certificates. Within thirty (30) days after the
written reasonable request therefor from the Leasehold Mortgagee, the Ground
Lessor shall deliver to the Leasehold Mortgagee (and any other party identified
by the Leasehold Mortgagee) an estoppel certificate signed by the Ground Lessor
in form reasonably designated by the Leasehold Mortgagee which certifies as to:
(a) the rent payable under this Facility Site Lease and the date through which
such rent has been paid; (b) the term of this Facility Site Lease and the rights
of the Ground Lessee, if any, to extend the term of this Facility Site Lease;
(c) the nature of any defaults by the Ground Lessee alleged by the Ground
Lessor; and (d) any other matters reasonably requested by the Leasehold
Mortgagee.
Section 18.9. Lease Indenture Trustee Rights. The Ground Lessor
acknowledges and agrees that if the Lien of the Lease Indenture has been
discharged or assigned to another Leasehold Mortgagee (subject to the terms and
conditions of the other Operative Documents), the terms and provisions of this
Facility Site Lease inuring to the benefit of the Lease Indenture Trustee shall
be for the benefit of, and exercisable by, any such Leasehold Mortgagee.
SECTION 19. SUBDIVISION
33
Upon the request of the Ground Lessee, the Ground Lessor shall, at its
expense, use commercially reasonable efforts to cause a legal subdivision of the
Facility Site from the Retained Dickerson Land (the "Subdivision"). The Ground
-----------
Lessor and the Ground Lessee shall cooperate with each other and use good faith
efforts to do whatever is necessary (including, without limitation, promptly
executing any documents or instruments required in connection with the
Subdivision) in order to effectuate the Subdivision.
(Signatures Appear on Following Page(s))
34
IN WITNESS WHEREOF, the parties hereto have caused this Facility Site
Lease and Easement Agreement (L1) to be duly executed and delivered under seal
by their respective officers thereunto duly authorized.
GROUND LESSOR:
SOUTHERN ENERGY MID-ATLANTIC, LLC,
a Delaware limited liability company
By: /s/ Raymond Haley
--------------------------------------------------
Name: Raymond V. Haley
Title: Vice President
Date: December 19, 2000
GROUND LESSEE:
DICKERSON OL1 LLC,
a Delaware limited liability company
By: Wilmington Trust Company,
not in its individual capacity but solely as Owner
Manager under the Lessor LLC Agreement
By: /s/ W. Chris Sponenberg
--------------------------------------------------
Name: W. Chris Sponenberg
Title: Assistant Vice President
Date: December 19, 2000
Solely for the purposes of being bound by the terms,
covenants and conditions contained in Section 10 hereof
(including, without limitation, the granting of the
easements set forth in Section 10.3 hereof ):
SOUTHERN ENERGY MD ASH MANAGEMENT, LLC, a Delaware
limited liability company
By: /s/ Jennifer A. Cohen
----------------------------------------------
Name: Jennifer A. Cohen
Title: Vice President
Date: December 19, 2000